Yet another regulatory review (though they tend to be called “market studies” nowadays), this time on investment platforms.
Way back when, we decided we did not want to be an early adopter of platforms. It took a lot of convincing for us to adopt one. At the time, it seemed there was a lot of experimenting taking place on the adviser community. As we know, some platforms are no longer with us and many are struggling to be profitable.
However, the market appears to be maturing, which probably accounts for the numbers quoted in the FCA terms of reference.
Its paper, Investment Platforms Market Study Terms of Reference MS17/1.1, tells us assets on platforms increased from £108bn in 2008 to £592bn in 2016. Combined with £100bn from firms offering similar services (such as workplace savings schemes), this accounts for about 78 per cent of the retail investment market.
I am not surprised. Platforms have made life much easier for both clients and advisers. Whereas in the past, clients would have to wait to receive a statement or phone the provider to get a valuation, they now have 24/7 instant access to them online.
Platforms also make the adviser business more efficient in implementing investment portfolios. Rebalancing and fund switching are more effective too, and the regular servicing of clients is enhanced.
What I hope the market study proves is that there is a symbiotic relationship between adviser and client where platforms are concerned. What is good for one is good for the other.
Part of the investment advice process is client education. Clients should be aware of and understand every part of their portfolio. X-ray services provided by platforms should be an aid to helping clients do so.
At the very least, they should know why their money is invested in a particular way at both asset class and fund level. It is much easier to do this via a platform than wading through multiple pages of data.
The consolidated tax vouchers produced by platforms and the capital gains tax calculators available also save clients and advisers time in tax reporting.
In my view, platforms are a cost effective way of managing portfolios, so I hope the study does not simply switch its emphasis to charging levels and methodology. I know the FCA wants a cost competitive marketplace but it needs to focus on value, not price in isolation.
Platforms are not products; they are a service tool. And while one might be more expensive than another, price should not be the only factor in selection.
Nick Bamford is executive director at Informed Choice